*1 S074296.June No. 2000. al.,
CRAIG et ASMUS Plaintiffs and Respondents, al., PACIFIC BELL et Defendants and Appellants.
Counsel Christie, Telesis Legal Lu Group, Mary Theresa C. O’Loughlin
Elena E. Matsis for Defendants and Appellants. Paul, Walker, Walker, Hastings, & Janofsky Robert F. L. Abell and Nancy Linda M. Edwards for California Law Council Employment as Amicus Curiae on behalf of Defendants and Appellants. Lazear,
Hoffman Hoffman, Lazear; & Firm, H. Tim Arthur Thierman Law Mark R. Thierman and Carrie L. Freestone for Plaintiffs and Respondents. Opinion
CHIN, the —We granted of the United request States Court of J. Appeals the Ninth Circuit for an answer certified of law following question under rule 29.5 of the California Rules of Court:1 “Once an employer’s unilaterally adopted policy—which to be retained requires employees so 1All further references are rules to the California Rules of Court unless otherwise indicated. the become a of as a condition does occur—has specified part
long contract, thereafter may employer unilaterally [terminate][2] has not We even condition occurred?” though policy, specified An may conclude the answer to certified is question yes. condition, if the terminate a that contains a specified duration, indefinite and the effects the condition one of time, notice, without with interfering after a reasonable on reasonable vested benefits. employees’ Background
I.
A. Certification answer of certified to us 29.5(a)
Rule we law may provides questions (or state), a federal of the court of resort of any provided court last appeal answer, be determinative may court certifying requests question court, the California of a cause in the and the decisions of pending certifying concerning this no controlling precedent Courts or court provide Appeal aof 29.5(b) the certified Rule sets forth the contents required question. furnish this 29.5(c) certification Rule court to certifying request. requires briefs and court relevant other materials. “The shall discretion 29.5(f)
Rule states: Court Supreme California certified of law. or for an answer to the accept deny request question (1) that it HQ court factors may In its discretion the consider: exercising of a review a decision considers whether ordinarily deciding grant writ or order in or to issue alternative other California Court Appeal matter; [IQ (2) will answering whether original comity, terminate existing litiga- court’s functioning facilitate certifying help fact; tion; on extent to an answer turn questions which would flO other factors the court deem may appropriate.” fl[] *6 Circuit 29.5(a) forth are met here. The Ninth The three factors set in rule to the our answer that we answer the it question posed; has requested Ninth authority 29.5(g) clarify any time” the “[a]t to under rule to restate or 2Pursuant our for Ninth Circuit’s we “terminate” question, Circuit’s certified have substituted word is that to this court. The reason for substitution question word “rescind” in the certified terminate, ability Bell’s parties action in of Pacific courts below and the discuss this terms A legally term is defined. policy, than “rescind” it as that change, or otherwise rather it never statutorily extinguishes a contract as if governed event that contract rescission is mistake, consider- mutual or failure of parties’ is effected consent existed. Rescission Code, 1688, ation, 1689.) (Civ. The word substitution illegality, public purpose. or other §§ analysis. parties’ legal way affect the reflects decisions below and does not best will determine matter before court. No California case has question considered whether or can or cancel a how modify unilaterally implemented employment policy. 29.5(f)
The factors outlined in rule
also
our decision to
support
accept
for an
to the certified
is
answer
The issue
request
question.
presented
Circuit,
to California courts as
it
well as
Ninth
because
important
involves
significant
law. We can
question
expect
courts,
the issue to arise in our
due in
to our
in Scott v.
part
opinion
427,
Gas & Electric. Co.
B. Facts
In Pacific Bell issued the following “Management Employment (MESP): “It Security Policy” will be Pacific Bell’s to offer all policy management who continue to meet our business changing expec- tations employment security through for other reassignment retraining management even if their positions, are eliminated. This present jobs fl[] will be maintained so as there is no long will materially affect Pacific Bell’s business achievement.” plan
In January Pacific Bell notified its condi- managers industry tions could force it to discontinue its MESP. In a letter to managers, chief company’s executive officer wrote: intend to do everything “[W]e our possible preserve Management How- Employment Security policy. ever, given reality marketplace, changing demographics reduction, workforce and the continued need for cost prospects this continuing are even will diminishing—perhaps, We unlikely. monitor the situation if we determine that business conditions continuously; commitment, no longer allow us to this we will inform- keep you immediately.” later, two in October
Nearly years Pacific Bell announced it would 1, 1992, terminate its MESP on so that it could achieve more flexibil- April ity its business and more conducting in the market- compete successfully *7 That same Pacific Bell announced place. day, it was a new layoff adopting (the Force Adjustment Program) policy Management replaced a to decrease designed MESP but severance generous provided program and and ter- involuntary management through job reassignments voluntary continue for Bell would working minations. who chose to Pacific Employees Those who to retire opted receive enhanced benefits. pension employees benefits, includ- December would receive additional enhanced pension chose and who annuity increases in ing monthly pension options. Employees receive these additional enhanced pen- in November 1991 would resign services, and life sion benefits as well as medical insurance outplacement bonus one severance salary year, pay equaling employee’s of the of service. multiplied by percentage employee’s years former Pacific Bell who were employees Plaintiffs are 60 management affected the MESP cancellation. chose to remain with the They company for several after the termination and received increased pension years benefits continued under the new working for their while employment Force All but of them Management Adjustment Program. eight signed releases their to assert claims from their right arising waiving termination. under the or its MESP Bell and an action in federal district court against
Plaintiffs filed Pacific Telesis Group,3 seeking declaratory injunc- parent company, contract, relief, of fiduciary tive as well as for breach of breach damages fraud, Act Security and violations of the Retirement Income duty, Employee (ERISA) The filed countermotions for (29 U.S.C. 1000 et seq.). parties § court before The district discovery. partial summary judgment conducting in Pacific Bell’s favor the 52 summary judgment against plaintiffs granted In an the Ninth Circuit affirmed opinion, who releases. signed unpublished in this district court’s judgment respect. The court on breach of summary judgment district granted claim It held that who did not releases. eight sign favor plaintiffs if an had the terminate personnel policy even right not in cases where contractual would creating obligation, right apply for duration or condi- a term original incorporated employment policy rescission, assent to tions for absent evidence of the employees’ stronger concluded than court modification their continued employment. it demonstrated could not terminate its unless first that Pacific Bell MESP alter MESP) “a that will materially the words of the (paraphrasing Pacific Bell’s business achievement.” plan Pacific Bell policy substantially similar the one Group, 3Pacific Telesis which issued a
issued, lay request it did not off directly involved in the certification because hire therefore, purposes economy, we refer remaining in this action. For Bell. only defendants as Pacific *8 Thereafter, the entered into a in parties stipulation providing part, Bell Pacific “elected not to further evidence in this action with present any of whether there has been ‘a respect question that will alter Pacific Bell’s materially business achievement’ . . . and plan agreed summary entered in favor of the judgment may eight remaining Plaintiffs on the issue of for their claims of breach of contract liability by 5, 1997, breach of the MES . . . On the district court entered policy May an order and entered approving stipulation favor judgment plaintiffs’ on the issue.
Pursuant to the agreement, the court certified for parties’ interlocutory MESP, the issue whether Pacific appeal Bell breached the and the Ninth Circuit accepted In a interlocutory appeal. the Ninth published opinion, Circuit stated its certification and noted that our request answer to the certified would determine question of the case remaining portion pending (Asmus before it. (9th Bell 1998) Cir. 423-425.) 159 F.3d The court agreed (Id. abide our 425.) answer. at p.
II. Discussion
A.
Employment Law
California
We held in Foley v.
Interactive Data Corp.
In some employer adopts no-layoff policy provides employ- ees with an employment in order to earn the security policy employees’ *9 and This is fair exchange them security. for job in exchange granting
loyalty facts, unilateral the basis for an enforceable it on provide may, depending return i.e., in contract, does not receive promise in the promisor one which Contracts, Witkin, 1987) (9th Law ed. (1 of Cal. Summary consideration. as Legal Handbooks and 221-222; Befort, 213, Employee see pp. § of Effect 326, 342.) Rel. L.J. Disclaimers (1991/1992) 13 Indus. contract, is under an one who there is only promisor, In a unilateral 1.23, 87.) The (1993) (1 p. Corbin on Contracts enforceable legal duty. § As to act or forbearance. of the is in consideration promisee’s given promise forbearance, to including continuing act or in general, any the promisee, consideration constitute the unilateral may in to promise, work response 213, Contracts, Law, Witkin, supra, p. of Cal. (1 § Summary the promise. Contracts, 40-46; 5.9, 221; Rest.2d (1995) pp. 2 on Contracts Corbin § 72; Code, 71, 1584.)4 Civ. § §§ observed, (as attitude of the courts late years of “Of
As a Court Appeal security agree- is to consider [employment as of in general) well employers in effect as being to advantages employees offer additional which ments] if the employee offer is contract which accepted offers of a unilateral of gifts. They not as mere offers being in the continues employment, cause the in their jobs, and happier more content make the employees assist in avoiding to seek other employment, to their forego rights and the turnover, to both advantage and are considered labor Aviation (1955) 138 Cal.App.2d (Chinn Corp. v. China Nat. employees.” wage in employee a promises pay to employment contract in which 4An Scholars as a unilateral contract. typically described employee’s work is return for unilateral observe, however, an offer creates a always easy determine whether it is not to Indeed, 1.23, Contracts, 93-94.) the distinction (1 supra, § Corbin on or bilateral contract. bargain com- particular exaggerates importance types often between the contract concerns, the Restatement response to these “In performance without commitment. pelling however, ‘bilateral,’ without, (Second) the terms ‘unilateral’ has abandoned of Contracts 1.23, 94.) (Id. Restatement Second p. In the them.” abandoning concepts § behind Contracts, invites an offeree phrase, “Where an offer preserved in the the unilateral contract is acceptance . . . .” promissory not invite a rendering performance and does accept by Contracts, 45(1).) (Rest.2d § distinguish scholars, however, terminology to rely on the traditional prefer to legal Most analysis unilateral contract the use of promises because types the two of offers between Contracts, (1 on cases. Corbin employment growing years, particularly in recent has been observed, not take the form 1.23, innovation does “Sometimes As one scholar § in the reflected problem, on the perspective a new rule but rather of of a new substantive example, For traditional one. terminology analysis for a new substitution of a contracts descriptive of and ‘bilateral’ as (Second) terms ‘unilateral’ abandons the Restatement terminology and such innovations way the extent to which There is no to assess .... Redaction (Farnsworth, Ingredients in the of substance.” analysis portend innovations case, 1, 5-6, omitted.) In this fns. L.Rev. (Second) 81 Colum. Contracts Restatement bilateral contracts. unilateral and the distinction between we retain
11 P.2d (Chinn) 99-100 agreement severance [employer’s pay [291 91] benefits becomes enforceable unilateral contract if benefit employee accepts offer see also continuing employment]; Lang Burlington Northern R. (D.Minn. 1993) Co. 835 consti- F.Supp. employment [continued tutes of arbitration added acceptance manual after employment commenced]; Hunter v. Sparling Cal.App.2d services of consider- [continuing adequate 807] ation for future employer’s promise pay pension].)
The that California parties agree law permits employers imple- ment that become policies may unilateral contracts when implied-in-fact them employees their accept by continuing We do not further employment. here, the issue in the explore context although we note that whether employ- ment create unilateral policies contracts will be a factual in each question (Chinn, case. 138 supra, 99-100.) at here dis- Cal.App.2d pp. parties on agree how terminate may or a unilateral employers modify contract that has been accepted by that employees’ performance. Plaintiffs assert Pacific Bell was not entitled to terminate its until it MESP could demonstrate i.e., materially affecting business until the time referred to plan, in a clause in the contract. Pacific Bell asserts that because it formed the contract it could unilaterally, terminate or that contract as as it modify long time, did so after a notice, reasonable affected gave reasonable employees and did not interfere with the vested benefits employees’ (e.g., pension other benefits). retirement Even if we were to additional consider- require ation, Pacific Bell contends it that gave consideration enhanced by offering benefits to those pension who employees chose to remain with the company after the modification took effect. Both on cases from other parties rely jurisdictions their support respective positions.
B. Other Jurisdictions state,
Because there nois case in on the in this point present question each on the rule as stated in parties rely other their jurisdictions support views. particular
Pacific Bell to the rule in the points jurisdictions addressed the whether and an question how terminate or employer may modify employment security has become an implied-in-fact unilateral contract. Regardless legal theory employed, majority other jurisdictions have addressed the conclude that an em terminate ployer may a contract no fixed modify with duration period after a reasonable time if it period, provides reasonable notice, and the modification does not interfere with vested ben (See, efits. e.g., (1995) Elliott v. Board Trustees 104 93 Md.App. [655 12 46, (1989) 438 (Elliott); Question
A.2d In re 432 Mich. [44 51] Certified 112, 120, 121, v. Basin Coop. N.W.2d fn. Sadler Elec. Power (Bankey); 17] Borden, 296, 300; 1988) (1994) 431 316 S.C. (N.D. N.W.2d v. Inc. Fleming Stores, 589, (Utah S.E.2d v. Dan’s Food Inc. (Fleming); Ryan 452 [450 595] Co., 401; 395, 1998) P.2d Inc. v. Nichols 244 Progress Printing 972 Denny’s v. Printing); Gaglidari Va. 337 S.E.2d (Progress [421 431] Restaurants, Inc. 117 Wn.2d (Gaglidari); 426 1367] City (S.D.N.Y. 1987) 658 F.Supp. Leathem Research Found. Univ. of these refer to law in whether an general deciding Most courts reason modify They terminate or contract. may terms that because created the em- unilaterally, policy’s terminate or them with reasonable notice. may ployer Elliott, 51; A.2d at 450 S.E.2d (See, Fleming, supra, p. 655 e.g., p. 431; 595; Gaglidari, supra, S.E.2d Progress Printing, supra, p. 1367; N.W.2d at Bankey, supra, [relying P.2d at but see 119-120 *11 to allow to terminate on not contract theory, employer public policy grounds, notice].) with reasonable discharge-for-cause policy the three to the termination indicated that of Fleming approaches possible the one consistent with it favored the as most question, approach 594-595.) unilateral contract 450 S.E.2d at (Fleming, supra, principles. time before first allow termination without notice at any The approach—to (Ibid.) court too harsh. Fleming of the contract—struck the as completion (Drennan in California. v. Star That now considered obsolete approach 757].) 414 P.2d also (1958) Fleming rejected Co. 51 Cal.2d Paving [333 on model that bilateral an alternative would minority impose concepts consideration to mutual assent and additional unilateral contract to require 595.) S.E.2d at The court (Fleming, the termination. 450 supra, p. support after recognizing employer-em- settled on majority approach that must have static. stated Fleming is not “[e]mployers ployee relationship handbook to meet the a mechanism which allows them alter the employee (Ibid.) needs of both business and changing employees.” observe, hold today As minority jurisdictions plaintiffs terminate contract cannot or a unilateral employment employer (See Torosyan consent. knowledge without employees’ express 89, 99]; 1 A.2d Brodie Pharm. 234 Conn. Ingelheim Boehringer [662 1268; P.2d Robinson v. 1997) (Wyo. v. General Chemical 934 Corp. 359, 364.) Like 1994) 19 F.3d (7th Services Cir. McKinley Community Ada S. dissent, modification of a unilateral reason that termination or they additional consideration acceptance requires affected because their choices in of a termi- employees, only light pending (See, nation be to or to continue v. ITT would Demasse resign working. e.g., (Demasse).) Ariz. P.2d Corp. 500 1145] Demasse, Most the Ninth Circuit certified a recently, question Arizona Court whether Supreme layoff seniority provision (stating will off ahead of company lay senior junior employees employees) may modified to off without permit employer lay employees (Demasse, 1140.) status. P.2d at regard seniority The p. amend, handbook reserved the employee employer’s right modify, handbook, cancel it. When the received the employees they signed understood and acknowledgement they would comply provisions. (I later, 1141.) Four modified the p. years layoff d. “ status, to base it not on but on policy seniority ‘abilities and ” documentation (Ibid.) performance.’ were plaintiffs whom the laid off 10 after company days the new took effect. They court, sued in federal district laid alleging were off in breach of an they (Ibid.) contract. implied-in-fact
After the district court found that the could alter its employer unilaterally handbook, the Ninth Circuit certified the to the Arizona Supreme that, Court. That court concluded most handbook terms are although merely descriptions some could create employer’s present policies, implied- contracts, in-fact (Demasse, on the depending intent. parties’ supra, 984 rule, The court that once a adopted minority holding contract, handbook becomes an implied-in-fact cannot *12 (Id. assent, unilaterally 1144.) it. at mutual p. Any change requires with continued employment for the being inadequate change. consideration (Id. at 1145.) The p. court was concerned the alter the could employer and, contract terms on the same day, fire the employee, rendering original (Id. contract 1147.) It Arizona illusory. p. rejected precedent holding consideration for the continu- employer provided change by to ing and the provide jobs, manifested their assent employees by continuing to (Ibid.) work.
Vice Chief Justice Jones’s dissent
the notion
aptly
that in order to
rejected
free itself of future
obligations,
would be
company
required
provide
with a
increase or other bonus
wage
to new consider-
amounting
so,
reasoned,
ation. To do
the dissent
would
a bilateral
incorrectly impose
on the unilateral
principle
unable to
relationship,
leaving
business,
manage
essential
impairing
and
managerial flexibility,
causing
undue deterioration of traditional
(Demasse,
supra,
principles.
Jones,
(dis.
14 rule, found the dissent also the more reasonable
In preferring not wanting reasoning the Demasse majority’s employers unsatisfactory one in the terms are free never to issue a handbook’s simply to be bound observed, forced unilaterally may first As the dissent “employers place. something to curtail or shut down operation, economic circumstance chooses in good to do. When have the absolute right employers faith, to eliminate employee business objectives, in pursuit legitimate shutdown, there has been curtailment or total as an alternative to to the constitutes a benefit Such forbearance forbearance by employer. The employer the form of an offer of continuing employment. under modified newly albeit who continuing employment, provides manual.” terms, the amended policy consideration to support also provides Jones, J.).) (dis. V. C. We P.2d at 1155 (Demasse, opn. supra, p. and find its application dissent’s thoughtful analysis with the Demasse agree own state’s before it reflected in our of contract principles Scott, (See, e.g., supra, treatises. scholarly case law developing Contracts, 233, Law, Witkin, 472; Cal. Summary § Cal.4th at p. that would restrict several arguments We turn now to plaintiffs’ its MESP. to terminate or modify Bell’s right Legal Principles
C. Application of
1. Consideration valid consideration that Pacific Bell no gave
Plaintiffs contend modification. Accord- MESP termination subsequent bind proposed contract to terminated the Pacific Bell when ing plaintiffs, terms, with no it left its employees contract with different create new or other consideration. additional benefits bargain opportunity hence, there no mutuality was were obligations unequal, parties’ for the change. obligation *13 termination of The rule general governing proper disagree.
We after a reasonable determines is that once promisor unilateral contracts contract, terminate and provides employees or modify time that it will re- is not additional consideration notice of the change, reasonable Contracts, 236.) Law, Witkin, p. of Cal. (1 supra, § Summary quired. for con- new consideration requiring mutuality obligation principle The (Ibid.) In the unilateral contracts only. to bilateral tract termination applies For an effective context, (Ibid.) no mutuality obligation. there is contract continued modification, in the form of employee consideration there is (Ibid.) and services. The rule this correctly recognizes applies ante, Here, (See 11-14.) Bell its principle.5 replaced MESP with a Plaintiffs’ continued layoff subsequent policy. employment constituted of the offer of the modified unilateral contract. As we acceptance observed, a rule consideration in addition to contin- requiring separate ued as a limitation on the to terminate or ability modify employment would contradict the that the security agreement general principle law will not concern itself with the of consideration. (Foley, adequacy supra, 679.) 47 Cal.3d at p. is also true. Just as must corollary employers accept employees’ terms,
continued as consideration for the contract employment original terms, must be bound amendments employees to those with the availabil- ity as consideration from the continuing employment serving adequate terminated When Pacific Bell employer. MESP and then offered original who received notice and continuing employment signed effect, terms, to that acknowledgement the new employees accepted contract, modified subsequent to work. by continuing Continuing work after the termination and modification constituted subsequent (See new terms. Pine acceptance River State Bank v. employment (Minn. 1983) Mettille 333 N.W.2d 626-627 is employment [continued sufficient modification].) consideration for
2. Illusoriness
Plaintiffs claim alternatively that Pacific Bell’s MESP be an would contract if Pacific Bell could illusory it. Plaintiffs on unilaterally modify rely the rule that when a to a contract retains the unfettered party right terminate the contract is deemed agreement, to be illusory. Witkin, (See Law, Contracts, 234, of Cal. Summary §
Plaintiffs are only correct. Scholars define contracts partly illusory observes, what are they not. As Corbin “if a is made promise expressly occur, conditional on know cannot no real something parties promise has been made. one Similarly, who states T to render a future promise arrives,’ if I want to when the time performance, has made no at all. promise also, It has been thought, words are if are promissory illusory they conditional on some fact or event under the control wholly promisor’s it about bringing is left wholly own will discretion. promisor’s true, however, This is not if the words used do not an unlimited leave option to the one It them. is true if the words used do not in fact using only purport 5Curiously, minority the dissent jurisdictions ignore sides with the that chose to these *14 governing traditional rules unilateral contract termination or modification.
16 Contracts, 5.32, (2 future in on way.” supra, pp. to limit action Corbin any § 175-176, Thus, terminate the omitted.) fns. or unqualified right modify is not But the fact that one reserves the implied enforceable. party is not its enforce- to terminate or a unilateral contract fatal to power limitations, ment, fairness if the is such as exercise of power subject 177; Witkin, Law, (See id. at 1 of Cal. and reasonable notice. p. Summary Contracts, 233, 241.) supra, p. § observes,
As Bell MESP not because illusory Pacific was it was In other obtained the benefits while plaintiffs operable. words, remained Pacific Bell to follow it as as the MESP obligated long was would be in effect. no-layoff policy highly prized Although permanent workforce, modern it does not follow that less is without anything (See Bankey, value to the or is an illusory promise. significant force, 119-120.) 443 as the MESP remained long N.W.2d As supra, adhere to could not treat the contract as illusory by refusing Bell terms; and was fully was not with optional promise Contracts, (2 or on enforceable until terminated modified. Corbin 5.32, p. §
3. Vested Benefits benefit on
Plaintiffs next that the MESP conferred vested allege observes, like bonus or a But as Pacific Bell an accrued pension. employees, has as interest no court treated vested employment security policy (See 443 N.W.2d at fn. 17 sector Bankey, supra, private employees. created by cannot be stretched to include rights concept obligations [vested workforce].) In to general written statements employer’s applicable addition, in bad do not Pacific Bell terminated its MESP allege plaintiffs that an Although generally faith. we agree plaintiffs employer may benefits, the MESP vested we do not find that interfere with an employee’s to, created, rise vested benefits in favor. gave plaintiffs’ 4. Condition as Duration Clause Definite termina- contend that a contract specifying
Plaintiffs alternatively in lieu of a (or nonoccurrence) of a future happening, tion on occurrence date, that cannot terminated or one of definite duration specific (See (1927) 85 until occurs. v. Whittingham modified the event Wittmann stock when P. to deliver shares of Cal.App. 63] [contract [259 duration]; La had note is contract definite stock dividends or profits paid Casa Hopkins Cal.App.2d Jolla deManana v. ” “ until war’ to last ‘termination present specified [contracts 871]
17 ” “ until ‘can build a home for herself’ are contracts for plaintiff reasonably duration].) Pacific Bell declared that it maintain its definite Because would “so as” its business conditions did not substantially change, MESP long dissent, like the assert that the condition is automatically plaintiffs, specified one for a definite that Pacific Bell is to honor until the obliged duration condition occurs. dissent, and the view
Contrary plaintiffs “specified Indeed, condition” be one for either definite or indefinite duration. both may and the fail to that courts dissent have plaintiffs recognize interpreted termination contract that conditions of a future as on event happening one for a definite time duration or when “there is an ascertain- only period (Lura able event which termination.” v. Inc. necessarily Multaplex, implies 410, 847]; (1982) 414-415 129 see also Bradner Cal.App.3d Cal.Rptr. [179 338, 559].) 102 344 P.2d As Vasquez Cal.App.2d [227 observes, Pacific Bell even its MESP contained though language specifying would continue the “so as” it did not company long undergo achievement, its business did changes materially affecting condition plan not state an ascertainable event that could be measured in reasonable any MESP, manner. As Pacific Bell it created its when document explains, referred to have a changes would effect on the significant negative return, rate of company’s earnings, “ultimately viability [its] occur, business.” The noted that if the were to it would company change control, result from forces Pacific Bell’s beyond would include “major in the or the arena.” These changes economy would public policy changes to do with a fixed or ascertainable nothing event would govern or Pacific Bell’s each other plaintiffs’ under obligations policy. Therefore, the condition in the MESP did not restrict Pacific Bell’s ability it, terminate or as as the made the after a long company time, notice, reasonable on reasonable and in a manner that did not interfere Theatres, (See, with vested benefits. Consolidated Inc. v. employees’ e.g., 713, Theatrical Union Cal.2d Stage Employees 69 731 Cal.Rptr. indefinite terminable duration after a 325] [contract time notice].) reasonable on reasonable
The facts show that those conditions were met here. Pacific Bell and remained in effect until MESP it when implemented determined with was company maintaining incompatible its need for in the then flexibility marketplace. company implemented new Force in which whose Management Adjustment Program eliminated to either find another job were would positions given days within the severance benefits after signing leave company, company claims, a release of or leave the without severance benefits. company *16 Force entitled Voluntary a booklet with were provided employees benefits the company provided new detailing Programs Management cancellation. the MESP following
Thus, effectively a reasonable time was was in for MESP place a sound that it was no longer Pacific Bell determined terminated after dissent, in engage Pacific Bell did for the Contrary company. or “oppressive.” one could characterize as “manipulative” behavior that notice of advance were (Dis. provided ample at post, Employees opn., at least two more termination, even enjoyed and the present plaintiffs under a modified policy benefits and corresponding years employment sum, maintained the In Pacific Bell laid off. eventually before were they time, notice to the more than reasonable it MESP for a reasonable provided it did not interfere that it was terminating policy, affected employees more. nothing benefits. The law requires vested with employees’
III. Conclusion discussed, of contract prin- cases application our employment support As terminate an unilaterally whether an employer may in the decision ciples unilateral that has become an implied-in-fact security policy 678-679.) Under (See, 47 Cal.3d Foley, supra, pp. contract. e.g., dura- contract of indefinite terminate a unilateral may theory, employer time, and is tion, subject a reasonable its action occurs after as as long limitations, notice and preserva- reasonable including or implied prescribed Contracts, Law, Witkin, (1 of Cal. Summary benefits. tion of vested 233-234, enjoyed show that 240-241.) employees The facts clearly §§ Bell and that Pacific time the MESP for a reasonable period, the benefits of to terminate notice of its intent reasonable and ample gave employees employees’ time interfere with also did not MESP. The company addition, In the employ- termination. the MESP effecting vested benefits in light to work continuing modified ees accepted company’s certifica- Therefore, to the Ninth Circuit’s response modification. An as follows: employer should' answer conclude that we tion we request, contains a specified security policy terminate a written employment may and the condition, duration is one of indefinite if the condition notice, time, and without reasonable a reasonable on after makes benefits. vested employees’ interfering Haller, J.,* Brown, J., Baxter, J., concurred. * District, assigned the Chief Appeal, Appellate Fourth of the Court of Associate Justice VI, Constitution. of the California to article section 6 pursuant
Justice dissent. GEORGE, C. —I respectfully J. Court Appeals the United States
We granted request “Once of law: certified question the following Circuit to answer Ninth to be requires unilaterally adopted policy—which employer’s not occur—has become does part condition long retained so as specified rescind contract, thereafter may of the employment (Italics condition has not occurred?” even though specified the policy, however, a different question— answers added.) inexplicably The majority, *17 the policy employer’s by majority in it is assumed one which the condition assert- because indefinitely, to be retained employees requires occurred. not have may may or and thus is unascertainable edly false the single rests upon of the majority opinion The entire analysis Bell Pacific contractual condition permitting that the specified premise (MESP)—the oc- Policy” Security terminate its “Management Employment Bell’s business plan Pacific materially of a that will affect “change currence situation”)—does describe “an ascer- not (“a achievement” serious financial manner.” (Maj. reasonable could be measured in any tainable event ante, of the (1) conflicts with the language This premise opn., record, Pacific (3) is inconsistent with certified contradicts question, concessions, estab- is refuted by Bell’s own briefing explicit below, termination the condition allowing As lished contract law. explained the MESP. definite duration for ascertainable and a of the MESP is specifies assertion, that such Pacific Bell contends not even to the Contrary majority’s Indeed, Bell in a reasonable manner. a cannot be measured Because has not occurred. conceded that the condition has repeatedly termination not may condition for its contract forth an setting express occurs, not Pacific Bell may before the condition terminated unilaterally terminate the MESP. at the end of a single determines—in incorrectly paragraph majority event for its termi- an unascertainable the MESP specifies opinion—that it duration. Because of indefinite
nation and therefore is a contract term manner, erro- in this majority condition mischaracterizes contractual that is not within a much broader issue decides unnecessarily neously court, and not before this of the certified question, properly scope no assistance thus Circuit. The majority provides before Ninth properly and subverts Circuit in resolving pending appeal to the Ninth reaches that the majority unfortunate certification It is particularly process. case, court when the this that is not out to address broad issue presented all of its permanent and lacks participation is so divided closely members.
Rather than to a different from that certified to us by responding question record, the Ninth Circuit and I would answer the certified presented with a “no.” Once an simple unilaterally adopted employer’s to be retained so as a policy—which long requires employees specified contract, condition does not occur—has become a part employment not rescind the if the condi- employer may specified tion has not occurred. To the extent issue addresses different termination of that does not regarding security condition, contain such a its discussion is to the resolu- unnecessary proper and, event, tion this matter to established contrary principles contract law.
Under the majority’s analysis, employer unilaterally may terminate an to a current express promise job security employee—offered times, to induce not to economic when specifically resign good there is a of labor and a demand for shortage high employees— qualified because the later becomes disad- simply financially inconvenient promise downturn, an economic a time when the vantageous during *18 would most to be able to benefit from the and expect rely upon Not is such a result inconsistent with employer’s promise. only entirely law, fundamental tenets of contract but it also condones and encourages and unfair treatment of An manipulative, oppressive, employees. employer’s contractual not be would implied-in-fact promise binding upon but would be as as the desire to only good employer’s keep promise view, some a in the future. And in the not even unspecified majority’s point to maintain the for a duration constitutes a real promise promise specified I cannot in this failure to well-established promise. join faithfully apply of contract to contracts. If an to law wishes principles employment it do so its own incurred contractual escape voluntarily obligations, may those to new and it with prospectively regard may negotiate employees, under additional consid- covered employees existing agreements by offering eration and assent of the to the termina- individual obtaining employees tion of the employer’s obligations.
I of a The MESP Pacific Bell in states: “In support adopted force, elements of the business all work partnership among employment com- commitments have been established. An security employment security follows, HQIt mitment which to management applies specifically employees con- will be Pacific Bell’s to offer all who management employees policy business security tinue to meet our changing expectations employment and for other even management to through reassignment retraining positions, so long be maintained This will are eliminated. if their jobs present flU plan Bell’s business alter materially that as there is no will Pacific (Italics added.) achievement.” commitment, the MESP states security
After forth this setting employment that additional but in ways self-explanatory, the commitment is many that some to clarify format is help information in question-and-answer included to a in it. For responding that surround example, issues the MESP security,” of the “employment regarding meaning phrase a reasonably to work in need for all “the legitimate recognizes work,” and environment, about their future at explains free of anxiety stable turn, willing change by participat- must be flexible that managers, retraining. reassignment ing that alter materially of a will “change
With regard meaning achievement,” “In order to meet any the MESP states: Bell’s business plan financial a business must maintain viable posi- commitment future, it is confident about our possible tion. we are Although very arena could have in the or the economy major changes public return, ultimately effect on our rate of earnings significant negative occurred, forced to reassess the we would be of our business. viability If this is not intended phrase commitment. But it should be emphasized a serious it ‘easy company; truly be an out’ refers financial (Italics added.) situation.” MESP, became a term It is once adopted, undisputed *19 after the Pacific Bell and Six years between plaintiffs. unilaterally to cancel was Pacific Bell purported policy promulgated, MESP, effective 1992. April cancellation, Pacific Bell of the
In a memorandum informing managers that its ability compete that shifts in the marketplace suggested explained matters, and that greater flexibility personnel successfully depended upon cost reduction and competitive pricing. such would allow flexibility was flexibility incompatible that this memorandum stated requirement this docu- Nothing employment security. form of management however, indi- on summary judgment, ment or in other materials presented situation that would a serious financial cated that Pacific Bell was faced with materially rate of return or earnings, effect on its significant negative business, achievement, of its threaten the viability alter its business plan Instead, other MESP. this memorandum those terms are used in the as that Pacific Bell was simply materials to managers emphasized provided that adoption cost reduction efforts predated continuing previous MESP, including in order eliminating “pockets management surplus,” more compete successfully.
In commenced an action in federal plaintiffs district court alleging, other that among Pacific Bell breached the things, MESP. With regard claim, breach of contract the district court denied the initially competing motions, of both Pacific summary judgment Bell and on the plaintiffs ground that insufficient evidence had been presented whether there had regarding been a that would change affect Pacific Bell’s materially business plan order, achievement. At the on the motions and in its hearing written the court observed that Pacific Bell had not contended in its that it was briefing entitled to terminate the MESP because the condition had occurred. specified The district court concluded that in cases “in which original employment term incorporates duration or the circumstances regarding under , which rescission is . . . an is bound possible duration of established, or the terms for rescission that it absent unilaterally some stronger evidence of assent to the modification proposed than the fact that have chosen to remain employed.”
Pacific Bell informed the district court subsequently that it elected not to litigate occurred, issue whether the condition in the MESP had and that Pacific Bell would could be entered in stipulate summary adjudication favor of for breach of the MESP so that the plaintiffs issue could be certified for an At a interlocutory appeal. hearing regarding stipulation, following exchange occurred: And to waive you’re willing “[The court]: claim that your there was business reason to adequate abrogate [an] Correct, Bell’s we would not that. litigate [MESP]? [Pacific counsel]: Ml RD [IQ ... We would not ask to evidence on that.” put [in] the district court Accordingly, “[g]ranted that. . . summary adjudication who [p]laintiffs worked after the was were entitled to implemented [MESP] its benefits so as . . . there ‘no long was alter will materially ” Pacific Bell’s business achievement.’ The court’s order plan subsequent “Defendants explains: argued canceled this they effectively notice implemented personnel policy by of cancellation and addi- giving *20 tional consideration in the form of new benefits. This Court held canceled, terms, i.e., could not be its own unless Pacific except by Bell could establish a altered change its business materially plan achievement. Defendants would not evidence to stipulated they present (Italics added.) establish that financial condition.” Circuit, In the briefs it filed in the Ninth Pacific Bell asserted that it has a to cancel the MESP right unilaterally, notwithstanding specification Bell, to Pacific According of the MESP. for rescission condition express its business plan a change affecting regarding in the MESP the provision of the duration policy. addresses one possible is a clause that achievement unilat- contended, to clause, limit its right did not Pacific Bell This Bell’s Pacific Regarding its duration provision. either the erally further evidence not court that it would present in the district stipulation set “The issue, brief: Bell stated in its reply [MESP] concerning conduct layoffs. Bell could for when Pacific economic standard a specific claiming Bell was not that Pacific did was to provide All the stipulation not assert added.) Pacific Bell did (Italics met that standard.” the condition specified duration or that of indefinite MESP is a contract term is unascertainable. termination of the MESP and we granted, Circuit that the Ninth requested, It is in this context above. of the of law quoted certification II the federal case in of the history underlying
In view foregoing that, courts, there can be no doubt of the certified question, phrasing certification, that the condition the Ninth Circuit contemplated in requesting the occurrence of an the MESP describes for the termination of specified and is subject by Pacific Bell proof event that could be ascertained Otherwise, been would not have the question of evidence. presentation occurred,” because if a condition “that has not in terms of phrased unascertainable, deter- no means for there have been condition were would Furthermore, in the nothing had not occurred. that the condition mining that the event suggested Circuit or the Ninth briefing presented record unascertainable. was
Nevertheless, affecting materially that a change decides thus is not ascertainable—and business achievement Pacific Bell’s plan cannot be such a change of the MESP—because cannot define the duration can be such a change manner. The issue whether reasonable measured evidence, however, measured or is subject proof by presentation had if Pacific Bell even the federal courts. Accordingly, never was raised in Circuit would (it not), permit has the Ninth this issue in this court raised Moreover, is this contention such a contention.1 Pacific Bell to rely upon Circuit, it Ninth where in the briefing Pacific Bell’s own contradicted Circuit, narrow only under certain briefing Ninth in its in the Pacific Bell stated 1As (1) prevent appeal: on for the first time that court review an issue raised circumstances will appeal is issue while the the law raises new miscarriage justice; when a Business, (Parks Inc. School purely one of law. when the issue pending; *21 24
described the as more than a “nothing measure of business conditions that Pacific Bell would use to determine the viability continuing job and “a security” economic standard for specific when Bell could conduct the certified layoffs.” By going beyond the record of question the raised, federal to reach out to resolve an issue that proceedings never was thwarts the majority of the certification purpose scope process.
Because the does not answer the certified majority question, majority’s answer will not be “determinative of a cause in the court pending certifying Court, (Cal. . . . .” 29.5(a)(2).) Rules of rule When to considering whether consider, a certification grant we other request, among “whether things, will facilitate the answering question court’s or certifying functioning terminate help existing and “the extent to litigation,” which answer would (Id., turn on 29.5(f)(2) (3).) fact.” rule & In questions to choosing modify the certified question, answers a majority posits irrelevant question to the federal There is no basis in the record for the litigation. majority determine that a change Pacific Bell’s business materially affecting plan achievement cannot be ascertained or measured. The no parties presented evidence this on regarding issue and their do summary briefs judgment, allude to extraneous facts supporting majority’s resolution this factual question.
Because entire its resolution of this majority opinion depends upon issue, irrelevant the answer provided will not facilitate the by majority Ninth Circuit’s terminate the functioning help we litigation. Although Court, (Cal. restate the certified authority Rules of rale question 29.5(g)), we should do so when this will further—rather than frus- only trate—the certification We should not the record of the process. ignore so, federal nor proceeding doing should we restate the to reach an issue that is not presented. even Iif were to with the conclusion reached
Accordingly, agree by I would feel majority, with the manner in which it compelled disagree has transformed the unjustifiably (Cf. certified Los Alli- Angeles question. 352, 360, ance Survival v. City Angeles Los Cal.4th fn. 2 [93 P.2d 334 Cal.Rptr.2d court to us in [requesting certifying notify the event it had our restatement of the certified any objection.to question].) however, IAs shall I that the believe substantive conclusions explain, legal reached also are flawed. fundamentally
III When an specifies employer’s obligations event, be terminated will the occurrence of a future upon Symington (9th 1995) apply Cir. F.3d None of these circumstances new majority. issue raised *22 it is if unless and until the event occurs—even bound the contract by occur. the will for the to know when or whether event impossible parties (Hartman San Coml. Co. 936-937 Cal.App.2d Pedro 74-75; see 1965) ed. 212]; (2d of Contracts § Law Simpson, Contracts, above, that it will the MESP provides As set forth Rest.2d § Pacific materially affecting effect as there is no change continue in so long court, in Pacific In brief this Bell’s business achievement. plan opening the because that it did not cancel MESP Bell concedes expressly similarly threatened. Pacific Bell as a business was corporation’s viability condition at oral in this court that the specified permit conceded argument of has not occurred. termination the MESP ting
Instead, Circuit, sets contends that the MESP as in Pacific Bell Ninth discontinued forth one instance in which the would be only specific policy of right and does not constitute a waiver Pacific Bell’s change policy addition, in this instances. Pacific Bell asserts for the first time in other In clause, the MESP not contain a duration court does language not state a time which language because does definite period during Bell, a for a contract is According would in effect. Pacific is definite duration if the rise its termination giving event only specified inevi- ascertainable. Pacific Bell defines ascertainable event as one that occur and to one will that relates tably specifically parties’ obligations under the another contract. Claiming changes threatening viability are do or its business not inevitable nothing plaintiffs’ obligations Pacific Bell’s to each other under the Pacific Bell asserts policy, that such do a fixed changes are not ascertainable and therefore not establish duration for the MESP. above,
As established when a certified we generally answering consider for the first should not and factual theories raised legal party Therefore, view, court. in Pacific has waived my time in this Bell achieve- contention that business “materially alter[ing plan its] ment,” MESP, and that within is not ascertainable meaning Moreover, assertion that contract is one indefinite duration. Bell’s if it is an event the duration of contract is ascertainable defining only Bell relies. is refuted which Pacific very inevitable authority upon conclusion, the to Pacific Bell’s contention and the Contrary majority’s Therefore, a contract a definite Pacific Bell may MESP is duration. has its duration terminate MESP before the event defining occurred. for its that the event legal
Pacific Bell offers no factual position support only describes one instance which possible MESP specified be terminated. The clear might language security untenable; commitment itself demonstrates that this “This *23 position policy bewill so as there that long maintained is no will alter change materially Pacific Bell’s (Italics added.) business achievement.” The plan provision does not state that Bell Pacific maintain if no might the such a policy occurs, but rather will continue as as there is no provides policy long such change. the MESP does not that Similarly, advise Pacific reasons, Bell could terminate the for numerous one of be which might Instead, a its change altering business achievement. the plan very MESP Indeed, commitment. clearly the duration of the the specifies in clarifying meaning this the MESP only reflects intention that the provision, circumstance in which Pacific Bell would fail to honor its is commitment it where would be faced with a serious situation the financial threatening of its The viability business. MESP that this not “emphasized phrase intended to be an for the out’ . . . .” the ‘easy single Because company out,” condition was not intended to be an it is specified “easy entirely intention, MESP, inconsistent with Pacific Bell’s as stated in the expressly the to the for construe as dire majority termination in less permitting financial merely circumstances because Pacific Bell wishes to more compete successfully. to the
Contrary the theory advanced and Pacific unsupported Bell, numerous decisions contractual duration that do upheld provisions a definite or fixed specify time presently governing obliga- period tions Beach parties. (1939) Co. 13 (Long Drug Drug v. United Co. 158, 698], Cal.2d 165-166 P.2d and therein.) cases cited For in example, [88 Great Western etc. v. J. A. Wathen D. Cal.2d (1937) Co. 10 444 [74 “ 745], the defendant to sell agreed goods exclusively long ‘as plaintiff as and continues to from the plaintiff purchases defendant purchase . . . .’” The defendant contended that the contract was an indefinite and time therefore was terminable the will of either We party. disagreed duration, held and that the contract was not silent and regard (Id. was certain be specified period sufficiently enforced. at pp. 446-447.) in & Co. 132 Cal. Similarly, Seidenberg, Sutliff v. Stiefel “ 131], 65 P. a that it ‘to agreement provided was distributorship [64 ” remain force as find as sale’ on long goods ready [the defendant’s] West Coast. We held contract was not “so as to ‘vaguely expressed ” (Id. unascertainable.’ wholly Noble v. Reid- parties Avery Co. 341], P. entered into an Cal.App. agreement “ giving exclusive to sell the defendant’s ‘as plaintiffs right goods as were able to faithful service business long they give management trade in the trade was warranted allotted produce territory ” them, and no In to the defendant’s contention that longer.’ response contract, from the could not be ascertained of the agreement duration and valid. certain sufficiently that the duration was provision court held CIbid.) illustrate, asserting Bell is incorrect in decisions foregoing
As the if it only duration a contract is ascertainable that an event specifying duration decisions implying occur. Even in is fixed will inevitably issue, terminating silent on the event clause in contracts otherwise (E.g., be fixed inevitable. under the need not obligations party’s Theatres, (1968) 69 Employees Inc. v. Theatrical Union Stage Consolidated *24 713, 213, P.2d included 729-730 447 Cal.Rptr. Cal.2d 325] [contract [73 a as as there was long ascertainable term requiring performance implied the to might stage perfor- defendants undertake live present possibility 410, 414-415 mances]; (1982) Lura v. Inc. Cal.App.3d 129 Multaplex, [179 commissions to the to [agreement plaintiff implicitly Cal.Rptr. pay 847] sales]; v. terminate the defendant ceased Wittmann making would when P. 144-145 Whittingham [employment 85 Cal.App. [259 63] terminate the had contract would when stock dividends or employee’s profits stock].) him on his note for repaid purchase Bell’s that an Also unfounded is Pacific and the assertion majority’s must be an ascertainable event termination event specifically permitting to the to under the To the related one another contract. parties’ obligations or extent this assertion is intended to that the event must involve suggest contract, result from the duties of the under the specific parties sugges- (See, incorrect. La Jolla 98 tion is Casa deManana e.g., Hopkins a conferred to right occupy Cal.App.2d [contract 871] war]; until a after the termination Hartman v. dwelling specified period Co., could be San Pedro Coml. 936-937 Cal.App.2d [contract return].) if one and failed to Even terminated entered Armed Forces party to had to if one were conclude that event relate specified parties’ however, did contractual in the MESP obligations, event specified to concern Pacific Bell’s under MESP. As obligation plaintiffs policy commitment, to meet the itself order explains, security Bell needed to If the Pacific maintain viable financial position. company faced a serious financial situation in which the commitment would honoring business, reassess threaten the of its Pacific Bell would forced to viability Thus, altering the commitment. its business change materially plan much to do Bell’s under performance achievement would have with Pacific its the com- obligation the MESP would to to honor govern plaintiffs Or, whether using by determining mitment. the test adopted majority “ duration, for a such a ‘nec- change a contractual is one definite obligation ” of Bell’s obligation termination’ Pacific essarily implies comply ante, the MESP. 17.) (Maj. Pacific Bell’s opn., p. contention that such a would have change to do with Pacific nothing Bell’s obligation plaintiffs under the policy contradicts the only but language also makes no sense.
The includes an majority additional opinion reason—not raised the MESP does Bell—why not involve a contract term for a fixed duration. According majority, MESP “did not state an ascertainable event that could be ante, measured in any reasonable manner.” (Maj. opn., its Although unclear on the analysis point, majority appears conclude that the measured, referred to MESP cannot be because it would result from control, forces Pacific Bell’s beyond such as in the changes or in the economy public arena. offers no justification for its conclusion that the condition above,
cannot be measured. As established Pacific Bell’s intention as ex- set forth in pressly the MESP is that the would reassess its company commitment employment security if in the only major changes economy had a public policy return, significant negative effect on its rate of *25 the earnings, ultimately of its viability business. The does not majority to Pacific Bell attempt explain why would be unable to measure in a reasonable manner effects on its rate negative of return or or would earnings, be unable to assess whether such effects would threaten the of its viability business. The circumstance that such financial would result changes from factors the control beyond of Pacific Bell does not establish that to changes the own financial condition company’s cannot be measured. A major corpo- ration such as Pacific Bell knows well to undoubtedly how assess its very financial business, condition and any changes its affecting as a viability indeed has an to its obligation shareholders to (See, such information. report Code, Indeed, 1501.) Circuit, e.g., Corp. in its in the Ninth briefing § Pacific Bell described this condition as a “measure of business conditions” and a Thus, economic standard.” Pacific “specific Bell’s own characterization of the condition belies the conclusion that the majority’s condition is an indefinite, unascertainable event cannot be measured.
Pacific Bell is the that drafted the party of the MESP and language its to the affected explained meaning It is difficult to managers. understand Pacific Bell why would have included this if it did not language believe such a could be change ascertained in a reasonable manner. Certainly MESP indicates that Pacific Bell intended to induce its managers believe that this clause means something, yet concludes that it means majority Furthermore, nothing. it is difficult to Pacific Bell imagine why would occurred, concede that the has not if it is change to ascertain impossible minimum, should be not has occurred. At plaintiffs whether or the change the meaning extrinsic evidence present regarding afforded opportunity term meaningless. court declares that the contract of this clause before a 975, Evidence, Witkin, (See (3d 1986) Documentary ed. § Cal. Evidence 920.) in the MESP for its effect to the condition specified By refusing give termination, that the law does favor violates principle will, and that courts if uncertainty, because voiding contracts feasible, of the construe to effectuate the reasonable intentions agreements (1955) 45 (Cal. Lettuce v. Union Co. Cal.2d Sugar Growers parties. Code, 496]; 3541.) Civ. The language 49 A.L.R.2d §§ and Pacific Bell’s own characterization of condition for MESP be
termination leave no doubt the intended that condition could parties event, because Pacific Bell drafted the measured ascertained. In any be Pacific Bell. “In cases of against must resolved language, any uncertainty , . . . of a most contract should uncertainty language interpreted Code, (Civ. caused who exist.” strongly against party uncertainty it is materi- To extent unclear how occurrence § Bell’s achievement can be ascertained or affecting Pacific business ally plan measured, be ascertained may we must conclude the condition reasonably to its reference purpose. Bell has chosen not to evidence that the condition oc- present
curred, cites and indeed has conceded it has not occurred. Pacific Bell definite no that a contract condition for its authority suggesting specifying occurs, duration be terminated the condition and at may before oral is a this court Pacific Bell conceded that if MESP argument *26 duration, of definite the cannot be cancelled As Pacific policy unilaterally. Bell further the circumstance that the MESP was acknowledges, part not the unilateral contract does alter implied-in-fact employment applicabil- of the of contract law set forth above. v. Interactive ity (Foley principles Data 765 P.2d Corp. Cal.Rptr. Cal.3d 677-681 [254 Therefore, MESP (Foley).) Pacific Bell could not terminate the unilat- 373] the contract. erally breaching without
IV set forth in the analysis immediately I believe the conclusion question. answer to certified complete section preceding provide authority nor Pacific Bell cites any supporting Neither the majority arising contract a contract—including implied-in-fact proposition adopted security policy—may from an employer’s unilaterally employment be terminated before the unilaterally occurrence of an condition that express defines the duration of the contract. That is issue which upon we granted certification and the Therefore, issue only we answer. we properly may no occasion in this proceeding address the issue whether employment that does not security policy contain such a condition be terminated may unilaterally In view of the record employer. and the history courts, underlying in the federal litigation discussion of majority’s this issue cannot be justified. event,
In majority’s conclusion that an employer unilaterally may or terminate an modify employment security lacks an policy express duration provision, it simply by reasonable time maintaining and giving reasonable termination, notice of the proposed modification or contrary basic of contract law. An principles employer may or terminate an employment that has security policy become of the em- part contract, ployment without additional consideration providing and obtaining assent. employee’s notice of the Simply giving new obtaining continued employee’s under performance are preexisting agreement insufficient to establish a modification of the agreement.
The statutory
Code,
of at-will
presumption
(Lab.
2922)
§
be overcome
may
evidence that the
parties agreed
employer’s power
to terminate the
would be limited in
some manner. (Foley, supra,
Our decision in Foley rejected assertion that employer’s various public reasons should enforcement preclude of such employment security agreements. We that these emphasized must be agreements interpreted enforced of contract according law. principles “[Ejmployment security agreements are so harmful or unfair inherently [not] who do employers, *27 not service, receive of continued equivalent guaranties as to merit treatment different that from accorded other contracts. On the contrary, employers may benefit from the increased and loyalty such productivity agreements may of and inspire. Permitting reliance on proof [Citation.] implied-in-fact rule, contract does terms not nullify at-will it treats merely such contracts in a manner in contract keeping general law. We see no [Citation.] sound reason to from the exempt employment rules relationship ordinary (Foley, terms.” of implied of contract which interpretation permit proof 680-681.) 47 Cal.3d at supra, pp. in & Electric Co. Scott v. Gas reiterated these principles We held that a (Scott), which P.2d Cal.Rptr.2d
“Modification a in the a obligation by modifying agreement, assent, ordinarily which mutual and must consid- requires supported Witkin, 1987) (1 (9th eration. ed. Cal. Law Summary [Citations].” Contracts, view, 814.) traditional p. promise § “[U]nder or an under a contract to do more or take less subsisting than that contract the other gives is invalid unless requires party promises (3 Williston on as consideration.” give something serving capable 7:37, 604-605, 1992) omitted.) ed. Consideration (4th Contracts fn. § or detriment suffered be either benefit conferred may promisor upon Scott, practices policies to alter their “employers capacity 2In we observed that (Scott, It is obligations.” p. 11 Cal.4th so as not create unwanted contractual obligations prospec- capacity this to alter contractual unclear whether dictum refers event, modify existing implied terms. In our tively, capacity or to the contractual did emphasizes with and not decide that issue. opinion in Scott that we were not confronted Thus, (Ibid.) support this upon to the extent relies dictum Scott unilaterally may employers “developing conclusion that this state’s case law” indicates that ante, 14), such existing (maj. opn., implied-in-fact misplaced. reliance is *28 Witkin, Contracts, (1 217.) by promisee. or p. Doing § to do what one is bound to do cannot be consid- promising already legally (Id., 221, 227.) eration for a promise. p. §
Under these Pacific Bell’s of the modification principles, contract to eliminate the MESP the assent of to take less requires plaintiffs under the contract. Plaintiffs’ mere continued under the performance original does agreement not indicate assent to the To be modification. by supported consideration, an to the benefits of the estab- agreement by plaintiffs forgo lished must some security agreement include additional benefit to the plain- tiffs. Continued less under favorable conditions was not a -employment Instead, benefit to Bell obtained the plaintiffs. benefit of removing the restriction its to upon continuing obligation under the plaintiffs employ unilateral contract. preexisting noted,
As one commentator has decisions fallacy underlying upholding unilateral modification this context is modification of a contract is (Sullivan, formation. completely analogous Unilateral Modification of A Employee Analysis (1995) Handbooks: Contractual 5 Regent U. L.Rev. 261, 288-293.) The rule that the act of general continuing employment knowledge changed new or conditions create may was binding obligations framed in decisions in initially which courts considered the formation a unilateral contract. one’s Continuing insisting rights perform upon contract, however, under an are not existing grounds from which to proper to a assent of that imply party’s contract. In subsequent modification addition, contracts, as with all in order employment security must some agreement, new term or benefit inures provide to the of all affected “A to do one advantage less than is employees. promise obligated (Id. to do cannot legally constitute consideration.” fn. p. omitted.) “To argue modified because effectively simply the same led transactions which to its formation is an again occurred (Id. and incorrect axiom.” overly simplistic this majority endorses and incorrect overly simplistic view
modification of contracts. It relies the so-called upon approach other jurisdictions permits terminate benefits employers under reasonable implied-in-fact employment agreements merely giving however, I shall notice. As such a rule either opinions explain, adopting reject traditional of contract contain no expressly principles indepen- law dent contract of the issue. those Of decisions the issue analysis resolving contracts, all such examining ordinary law modification governing that, hold decisions in order for the modification to be binding, must additional consideration and the must assent provide
33 law under California we that it is beyond question modification. Because this issue law in resolving of contract traditional must apply principles conclude, all 677-681), consistent with I 47 Cal.3d (Foley, supra, issue, that of this contract analysis that in traditional engaged courts unilaterally, security agreement not an modify an may employment employer time and reasonable a reasonable giving maintaining simply notice of modification. proposed rule determined case the so-called majority
The leading
adopting
issue,
and thus
to resolve
contract
was insufficient
unilateral
analysis
considerations—that
based upon public
decided
may modify
that it
employment
has a legitimate expectation
Question (1989)
(In re
for economic and business reasons.
policies
Certified
112,
aIn
(Bankey).)
subsequent
Because under law employee agreements California implied-in-fact contracts, on conclusions Bankey's with equal footing express analysis suggestion are not for our majority’s persuasive purposes. Contrary of courts rely upon that most so-called adopting majority approach ante, 12), (maj. contract law because to contract law they opn., refer most these asserted Bankey of decisions and/or actually simply rely upon their conclusions.3 considerations public policy justify rule, however, an engage in minority analy- Courts so-called adopting such an sis law and conclude under of traditional contract principles 458, 1990) Bankey (relying upon and an (Colo.Ct.App. P.2d 460 3Ferrera v. Nielsen 799 modification, formation, regarding not an inapposite Alabama decision 493, contract); (1996) Idaho 248 P.2d [923 499] Parker v. Boise Telco Fed. Credit Union 129 contrary an undue Bankey impose rule would (relying upon and its determination (1995) A.2d Md.App. 104 93 upon employers); Elliott v. Board Trustees [655 burden Bankey, independent (relying Michigan common law as set forth no upon 51-52] Borden, issue); S.C. 452 S.E.2d analysis Fleming 595] v. Inc. static,” not and that employer-employee relationship is (relying upon the notion that “the allows to alter the therefore “must have a mechanism which them employers Gaglidari Denny’s employees”); v. changing needs of both handbook meet the business Restaurants, Bankey (relying upon Wn.2d 1367-1368] Inc. 426 [815 Hogue existing agreement); of an and authorities that did not concern the modification analysis, employer may modify existing unilaterally. They reject policy-based approach Bankey For example, progeny. *30 1263, v. General 1997) Brodie Chemical P.2d Corp. (Wyo. 934 1267-1268 (Brodie), the Wyoming Court stated: contends that Supreme “Employer an contract finding implied-in-fact handbook recognition provisions an involves which does not the analysis normal contract law apply principles afforded to contracts and further that the express asserts distinction of versus express our different rules for a implied permits applying modifying handbook contract. The Michigan Court utilized an Supreme interpretation 112, similar to in 443 Employer’s argument [Bankey, N.W.2d supra, 116] Bankey, .... In . Michigan Court . . unilateral permitted] Supreme modifications because handbook were not enforceable under a promises contract but rather under broad theory, considerations. public policy [Cita- because, The rationale is Bankey inapposite our as purposes tion.] [10 above, our handbook decisions hold that an explained implied employment contract does arise from established contract law and our contract principles law modification is settled concerning well that an agreement altering contract, written to be be based binding, must on consideration. [Citation.] . . . contract law principles apply employment [Established whether or express implied. [Citation.]”
Some
cases
unilateral modification of the
permitting
agreement—
like the
decisions
majority opinion—rely
formation or
upon
concerning
modification of
that
in
result
additional benefits to the
agreements
employee
security.4
such as job
1983)
Pine
State
(E.g.,
(Minn.
River
Bank v. Mettille
622,
333 N.W.2d
626-630
contract modification in which the employer
[a
additional
promised
job
was
consideration
security
supported by
consisting
687,
Machinery
(relying
Cecil I. Walker
Co.
Under contract we cannot has agreement accepted find that the offered new When the agreement. continued as the original employ- was performance, confers additional benefits ment when relationship begins, *31 to conclude as a it is reasonable the such upon employee job security policy, continuing employment. the unilateral offer accepts employee the to obtain The services and forgoes right employee provides the employer elsewhere as for the while employer’s promises, consideration the term. job security the extra and conferred enjoys productivity loyalty under an enforceable agreement, When the is employee already employed however, new consideration in the is the that must provide party for the the valuable agreement forgo right job exchange employee’s that, the rise This is vested in the sense once right giving security. created, has must its contractual com- been Pacific Bell honor right 711, (See 722-725 (1948) mitment. Hunter v. 87 Sparling Cal.App.2d [197 807].) The is that states that the rule under California law once majority general an after a time that it will terminate or determines reasonable contract, the with reasonable notice of modify provides employees consideration is not The further states change, majority additional required. an continued consideration for effective modifi- employment provides contract, cation rule recognizes of so-called majority ante, 14-15.) The cited authority this at sole (Maj. applies principle. opn., pp. rules,” however, of of concept mutuality for these “traditional discusses obligations under mutual must consist of obligation, binding which promises (1 a bilateral contract. in order to serve as consideration for each other in Contracts, Witkin, Law, 236.) This of Cal. Summary p. § of treatise modification or termination section of cited does concern that it to unilateral contract and states existing inapplicable expressly (Id. in the does cite another section same majority contracts. contract, limited to the treatise of a but that section is modification regarding right whether reserves promise promisor’s 233, at (Id., a bilateral contract. contract defeats mutuality obligation § Thus, 240-241.) that California law indicates incorrectly traditional rules to the termination application purported supports or modification of a promise job in an security existing unilateral employ- ment contract.5
The so-called
cases
minority
recognize
flaw in the
analytical
majori-
For
ty’s reasoning.
in Torosyan v.
example,
Boehringer
Pharm.
Ingelheim
37 1144-1145; accord, (Id. at Pankow v. West- benefit.” corresponding 1309, (N.D.Ill. 1990) 740 1313-1314 [employ- America Co. Mortg. F.Supp. security policy ee’s to work after revocation continuing attempted job conferred a benefit simply upon employer].) Pa- also advanced
Rejecting policy argument, employer’s public case, in it to have different cific Bell that would be undesirable present that an must be free different and governed by policies, employees 708 N.E.2d Doyle, to alter in opinion supra, employment policies, states; drawbacks, note we further we are aware of these “Although potential here that this is a and see reason to relieve matter no compelling it has incurred. who obligations the defendant of the voluntarily Employers as an choose to set forth handbooks and manuals policies and work force cannot retaining inducement to and a skilled attracting loyal time, a later later those because disregard obligations simply Indeed, (Id. them to be inconvenient burdensome.” perceives in the offering case Pacific Bell obtained present advantages times, in order to retain during economic managers good qualified elsewhere, these when obtained and might jobs otherwise employees then chose when the disregard changed marketplace could have benefited most from the policy.
Other have reached conclusions as those reached jurisdictions same based Ex Amoco Torosyan Doyle, reasoning. parte similar upon (E.g., Co., 336, 340-341; Fabrics Fiber So.2d Demasse v. ITT Corp. 729 (Demasse); Hanly 194 Ariz. [984 1147-1151] Riverside Methodist N.E.2d Hosp. Ohio App.3d 1130]; Brodie, 1263, 1268; McKinley v. Ada S. supra, 934 P.2d Robinson *33 (7th 1994) Community Services Cir. 19 F.3d 363-364 Illinois [applying law].)
The the dissenting in the case devotes much attention to majority present Demasse, however, The fails to supra, 984 1138. opinion majority, consider the Arizona to Court’s response points Supreme persuasive For made dissent. dissent would have found assent and by example, consideration in the continuation of their and—like employees’ employment, “strict of contract Bankey decision—would have eschewed rules modifi- cation” in of reason” and the favor “equity pragmatic employer’s 1157-1158, Jones, (dis. (Id. at of “legitimate opn. expectations.” J.).) V. C. The in the Arizona this notion that rejected ordinary case majority rules of contract modification should not in this context. “Self-interest apply a a reason to business may certainly legitimate request provide party unilateral assent to contract but law has never before change, permitted or excused of a contract on such a non-performance ground. [Cita- (Id. at 1150.) in Demasse further that p. majority tion.]” concluded continued alone is insufficient consideration for the employment modifica- tion, other noting result us to an “[a]ny brings absurdity: employer’s threat to breach its promise job consideration for its security provides (Id. addition, rescission of that promise.” In the dissent in p. Demasse, like some of the decisions the contract approving right modify criticized unilaterally, the so-called on the decisions minority ground bilateral they contract impose created contract principles upon unilaterally (Id. Jones, (dis. relationship. J.).) V. C. But the means opn. only a unilateral contract modifying rescinding involving continuing perfor- mance is mutual assent. The by cases do not conclude that in this minority one, situation the is transformed into a bilateral but rather that relationship contract, both must to a modification parties agree and that preexisting must furnish to the affected something that will serve as an substitute for the valuable adequate right job security seeks terminate.
Because the concludes that plaintiffs provided necessary consideration for cancellation of the MESP their by continuing employment, it does not reach Pacific Bell’s contention that it its own consider- provided ation increased by conferring benefits As pension upon plaintiffs. explained above, I disagree continued plaintiffs’ consider- employment provided ation the modification. The supporting additional benefits pension provided by Pacific Bell to could constitute plaintiffs conceivably given consideration A by Bell. of fact also remains whether plaintiffs, work, continuing the offer of modification accepted these accompanied by increased benefits. Those pension issues are not the certi- encompassed fied however. question, sum,
In the so-called minority rule adheres more faithfully general these governing Our principles types agreements. decisions instruct that prior we must such apply construing principles Therefore, enforcing implied-in-fact employment security agreements. if us, issue were properly I would conclude that an employer may before or rescind an unilaterally modify unconditional job security lacking policy, *34 an duration that become express has provision, part employment contract, without additional consideration and the em- providing obtaining assent. ployee’s
The majority’s determination would undermine the contrary efficacy set implied-in-fact employment agreements. Employer promises expressly handbooks, memoranda, forth in manuals and or in employment that but rather hollow could would not be enduring gestures promises as no they longer necessary once were viewed employer repudiated by Thus, is inconsistent with in the interest of the the majority employer. and its set forth in Cal.3d Foley, supra, established principles in recognized contracts because progeny, implied-in-fact modification of the law governing those decisions would not be governed by existing contracts.
V first, in two fundamental respects: opinion unsupportable to decide that is on this record nor in an issue neither purporting presented second, the certified an answer encompassed by question; providing contract law. The controlling major- conflicts with basic precepts unfair, unconscionable, endorses a indeed ity patently result—permitting that made to its promise continuing job security order to retain their during good services a period job prospects, later when the several repudiate promise impunity years determined that it was no in its interest to honor earlier longer commitment.
I dissent.
Mosk, J., Kennard, J., concurred.
Appellants’ was denied 2000. petition rehearing August J., J., Mosk, J., did not Werdegar, therein. C. George, participate Kennard, J., were of should be granted. opinion petition